U.S. social spending: We're stunningly wasteful.

America’s System for Providing People Basic Necessities Is Embarrassingly Wasteful

America’s System for Providing People Basic Necessities Is Embarrassingly Wasteful

Moneybox
A blog about business and economics.
April 9 2015 6:01 PM

America’s System for Providing People Basic Necessities Is Embarrassingly Wasteful

burning_money_shutterstock
America, burning bills.

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The United States spends a nauseating amount of money on medical care and doesn't get much to show for it, at least if you judge by our middling health outcomes compared with the rest of the developed world. This point is old news by now. And yet, I was still surprised by this chart from Jacob Funk Kirkegaard of the Peterson Institute for International Economics. If you add up all of our public and private expenditures, the United States actually devotes more of its economy to general government activity and basic social services than much of Europe, including social-democracy darling Sweden. And it's mostly because of our giant outlays on private health care, shown in yellow. 

funk_social_spending

Kirkegaard's study is interesting, in part, because it adds in tax breaks for things like education and housing to social spending. That's key to understanding how we stack up against other countries, since  America quietly carries out an enormous part of its social policy through the tax code (which in turn means that a lot of the benefits get distributed up to people who actually itemize their deductions). Even without our exorbitant private health care costs included in the picture, we're not especially efficient. Public spending eats up less of the national economy in Japan, South Korea, and Australia, for instance (yes, our giant military budget is part of the reason why, but its a small piece of the difference with Korea and Australia). But our health system—which wastes hundreds of billions of dollars every year on bad care, excessive treatments, and fraud, among other issues—is what really makes us exceptional.  

Jordan Weissmann is Slate’s senior business and economics correspondent.